Protected Trust Deeds (Scotland only)
Introducing the Protected Trust Deed
The Protected Trust Deed is offered only in Scotland as is similar to the IVA (Individual Voluntary Arrangement). It is a legally governed procedure by which you can repay your debt over a specified period of time. Monthly payments are based on what you can afford and after the period of your Protected Trust Deed, any remaining debt is written off.
The Protected Trust Deed process
The first part in the process of entering into a Protected Trust Deed is to compile a full list of creditors (people you owe money to), how much you owe, and what you can afford to pay each month.
The trustee will put together a form of proposals to the lenders for approval and administer the Protected Trust Deed. The Trust Deed may be registered as a Protected Trust Deed. This prevents lenders from taking legal action against you and ensures that interest will be frozen on your debt. The Protected Trust Deed is granted if two thirds or more of your creditors by value agree to it.
If you enter into a Protected Trust Deed then your creditors will have the right to receive any equity that you may have in your home. However, there are ways that you can protect your property.
Entering into a Protected Trust Deed means that you are entering into a contract to repay your debt, usually at a reduced rate. As such you agree during the term of the Trust Deed to:
- Co-operate with the trustee
- Pay the agreed monthly contribution
- Not take any further credit
- Advise the trustee should you receive any unexpected windfalls or your financial circumstances change
What are the advantages of a Protected Trust Deed?
- The trustee handles all correspondence from creditors, therefore relieving the pressure of debt
- A Protected Trust Deed is usually more flexible and costs less to administer than sequestration (bankruptcy
- With a Protected Trust Deed, your creditors will be unable to add further interest, charges, or take any further action against you
- You will in most cases still be able to hold certain public offices
- You will in most cases still be able to remain self-employed and continue to serve as a director of a company.
- Protected Trust Deeds normally last 3 years, after which any remaining debt will effectively be written off
- Information about the Protected Trust Deed is not published unlike sequestration (bankruptcy)
Protected Trust Deeds - Frequently Asked Questions
- What is the difference between a Protected Trust Deed and an IVA (Individual Voluntary Arrangement)?
- How do I know whether a Protected Trust Deed is the right option to my debt problem?
- Is a Protected Trust Deed sequestration (bankruptcy)?
- Why will my creditors agree to a Protected Trust Deed?
- How long will the Protected Trust Deed last?
- Will I lose my house if I enter into a Protected Trust Deed?
- Will a Protected Trust Deed affect my employment or professional status?
- I own a business, will I have to close it?
- Can anyone find out that I'm in a Protected Trust Deed?
- Which creditors can be included in a Protected Trust Deed?
- What will happen if I fail to keep up payments on the Protected Trust Deed?
- What will happen at the end of the Trust Deed?
- Do I need to notify my partner or family?
- Will all debt covered by the Protected Trust Deed?
- How does secured and unsecured debt differ?
- Do creditors have to accept the terms of the Protected Trust Deed?
- Can a single creditor refuse the Protected Trust Deed?
- Will I be protected from further recovery action, charges and interest?
- What if my financial situation changes?
- Can a Protected Trust Deed be cancelled?
- How long will it take to set-up a Protected Trust Deed?
- What will happen if the Protected Trust Deed is not approved?
Q.1
What is the difference between a Protected Trust Deed and an IVA (Individual Voluntary Arrangement)?
A. A Protected Trust Deed is the Scottish equivalent (in principle) of an IVA (Individual Voluntary Arrangement).
Q.2
How do I know whether a Protected Trust Deed is the right option to my debt problem?
A. Money Advice Direct is a 'best advice' debt solution organisation, this means that our consultants provide the most appropriate, unbiased advice for your debt problem, and our advice is free and without obligation.
Some debt solution companies promote the solutions that make them the most money, or don't consider the full range of solutions to debt. Money Advice Direct's policy is to always provide the best advice and offer a complete range of solutions.
Q.3
Is a Protected Trust Deed sequestration (bankruptcy)?
A. No, although governed by the court and a legal process for persons with unmanageable debt, a Protected Trust Deed is a less formal process than sequestration (bankruptcy).
Q.4
Why will my creditors agree to a Protected Trust Deed?
A. Although the letters and calls you may have experienced recently may suggest otherwise, your creditors want to help you with your situation and recover as much of their debt as possible. As long as you communicate honestly with them about your situation, they will understand and will in most cases accept less than what you owe if that is all you can afford and as long as they are satisfied that you will keep to any agreement.
Sequestration (bankruptcy) is costly, time consuming, and a large amount of the money raised from a sequestration (bankruptcy) will be used to cover professional fees, therefore creditors would in most cases prefer not to resolve the situation in this way.
A Protected Trust Deed offers the simplicity of a repayment arrangement between yourself and your creditors with legal backing, without the high cost and low returns of a sequestration (bankruptcy).
Your creditors will welcome a Protected Trust Deed where appropriate, as an effective resolution to the situation that you find yourself in.
Q.5
How long will the Protected Trust Deed last?
A. The Protected Trust Deed will last for a maximum of 3 years. Some Protected Trust Deeds may last for less than 3 years depending on individual financial circumstances.
Q.6
Will I lose my house if I enter into a Protected Trust Deed?
A. No, but if you have equity, this will be taken into account and may need to be released to pay your creditors. If the property is joint-owned, then an appropriate portion of the equity will be taken into consideration.
Q.7
Will a Protected Trust Deed affect my employment or professional status?
A. No, a Trust Deed is an arrangement for responsible people who want to deal with their debt problem, and as such you will not prejudice your employment.
Q.8
I own a business, will I have to close it?
A. No, you will not have to give up your business or directorship in a Protected Trust Deed.
Q.9
Can anyone find out that I'm in a Protected Trust Deed?
A. A Protected Trust Deed is very confidential. Money Advice Direct's advisors are trained on how to deal with your situation confidentially. Only Money Advice Direct and your creditors will be aware of your position
Q.10
Which creditors can be included in a Protected Trust Deed?
A. You can include debt to banks, finance companies, credit or store cards, HM Customs & Excise (VAT), Inland Revenue, and loans made by your friends and family. Debt that cannot be included are mortgage debt, hire purchase, student loans, fines, debt incurred through fraud, maintenance and child support arrears.
Q.11
What will happen if I fail to keep up payments on the Protected Trust Deed?
A. It is very important that once in a Protected Trust Deed, that monthly payments are made as proposed. If at any point your financial situation changes and the monthly payments are no longer affordable, then you must consult immediately with your Trustee.
If you don't keep up payments then your supervisor can initiate sequestration (bankruptcy) proceedings against you.
Q.12
What will happen at the end of the Trust Deed?
A. Your remaining debt will in effect be written off and you will be free from debt.
Q.13
Do I need to notify my partner or family?
A. You can choose not to notify your family, and even your partner, but we would advise that you do inform those that are very close to you
Q.14
Will all debt covered by the Protected Trust Deed?
A. Your Protected Trust Deed will cover your unsecured debt and arrears, such as unsecured loans, credit cards and rent arrears.
Q.15
How does secured and unsecured debt differ?
A. Secured debt is secured against assets you own, such as a house or a car. If you fail to keep up repayments on secured debt your assets may be at risk. Unsecured loans are not secured on any asset.
Q.16
Do creditors have to accept the terms of the Protected Trust Deed?
A. If two thirds or more of your creditors by value agree to the proposals, the Trust Deed will be protected. If they don't, then the Trust Deed can still go ahead but you will not be protected from further interest or recovery action.
Q.17
Can a single creditor refuse the Protected Trust Deed?
A. Yes, but this will only stop the Protected Trust Deed proceeding if they account for a third or more in value of your total debt. If they account for less than a third in value then they will be bound by the terms of the Protected Trust Deed regardless.
Q.18
Will I be protected from further recovery action, charges and interest?
A. If the Trust Deed becomes a Protected Trust Deed it will prevent any further action, including the addition of charges, and all interest will be frozen.
Q.19
What if my financial situation changes?
A. You will be required to inform your Trustee of any changes in your financial circumstances, good or bad. If your income is reduced, the Trustee can propose a variation on the terms of the Trust Deed to reflect your new circumstances.
Q.20
Can a Protected Trust Deed be cancelled?
A. No, just as your creditors must abide by the terms of the Protected Trust Deed and accept what has been agreed, you must also keep up repayments as agreed.
Q.21
How long will it take to set-up a Protected Trust Deed?
A. The process of preparing the Protected Trust Deed will begin immediately and is usually set-up and fully in effect within 6 weeks.
Q.22
What will happen if the Protected Trust Deed is not approved?
A. There are other alternatives to a Protected Trust Deed if it is not approved, Money Advice Direct will be happy to advise the next course of action if the Trust Deed fails.
IVA's
The IVA Guide
Money Advice Direct has put together an IVA Guide based on the enquiries and questions that we receive at our helpline offices.
In the guide we cover such subjects as IVA Approval, early settlment of your IVA, missed IVA payments, IVA failure, additional debt claims and much more.
[click here for IVA Guide]
What is an IVA?
The IVA is an extremely powerful tool enabling you to clear your debt and return to a clean financial bill of health. Visit Money Advice Direct's Guide to Individual Voluntary Arrangements (IVAs).
[more...]
DANGER
Due to the tremendous demand for debt consolidation services the United Kingdom is now overloaded with debt management companies that contain misleading information. [more...]